How does identity theft affect your credit score?
Identity theft is a serious crime that can destroy lives. Not only does it result in emotional and financial distress, but it can also ruin your credit score. Let’s look at four factors that are affected when you’re a victim of identity theft.
- Payment history
It's not likely that the thief using your credit profile to open accounts and make purchases is going to pay the bills. These missed payments impact your credit score badly. Reporting the incident does help, but it can take a few weeks before the fraudulent payments are removed from your Credit Report. Normally, victims of identity theft are not required to pay back what's illegally spent. But, it does result in tons of admin.
- Credit inquiries
What are the chances that the thief who stole your identity will open one account and call it a day?
Criminals are known to open multiple accounts in your name and these will show up as hard inquiries, impacting your credit report all at once. The only way to fix this is to dispute them with the credit bureau.
- Credit utilization
High balances, whether they were created by you, or a criminal, will increase your credit utilization ratio. Removing fraudulent charges from your credit report can help your credit utilization ratio return to normal. The first step is to check your credit report and dispute any queries as soon as you can.
- Credit history
Generally, it's not recommended to open more than one new line of credit at the same time. Doing so makes it harder to keep track of each payment. However, criminals are not likely to practice financial responsibility and will likely open multiple accounts in your name. The problem arises when several new accounts are opened simultaneously. This reflects poorly on your credit profile because lenders assume that you need credit frequently.
It's impossible to know when criminals plan to strike. That’s why it's best to be prepared. It helps to monitor your credit score and credit habits. Start by checking your credit report regularly. When reading your report, look out for accounts that you know for certain you did not open and make sure that you recognize all transactions listed. Did you know that you can check your Credit Report as often as you like, for FREE, when registering on the African Bank website? Yes, that's correct! And the good news is that you don't need to be a customer to enjoy this great benefit.